KRS 286.8-110: Rates -- Mortgage required as evidence of real estate loan -- Delinquency

charges -- Attorneys' fees -- Charges made part of note -- Limits on

prepayment penalties.

(1) Mortgage loan companies are prohibited from making loans and mortgage loan

brokers are prohibited from brokering loans in violation of KRS 360.100 and are

prohibited from making or brokering such loans at a rate or rates in excess of those

provided by KRS 360.010 and 360.025 or other applicable usury statutes.

(2) Every real estate lo an shall be secured by a mortgage or other instrument

constituting a lien upon the real estate securing the loan, according to any lawful or

well-recognized practice that is best suited to the transaction. Any such instrument,

constituting a lien, is herei n termed a "mortgage." All such mortgages shall be

recorded in accordance with the law of this Commonwealth.

(3) Delinquency charges may be made for each installment more than ten (10) days in

arrears, and only one (1) delinquency charge shall be made on a ny one (1)

installment. No delinquency charge shall be made unless disclosed as required

under subsection (2) of this section. In addition to such delinquency charges,

attorneys' fees not exceeding fifteen percent (15%) of the unpaid balance shall be

taxed as costs and court costs may be collected, provided that the note is referred to

an attorney not a salaried employee of the holder for collection.

(4) Any charges to be assessed against the borrower in the event a loan is paid prior to

maturity shall be p rominently displayed and made part of the note and the loan

closing statement regarding the method of computation of any rebate. No

prepayment penalty shall be assessed against the borrower following the third

anniversary date of the mortgage or sixty (60) days prior to the date of the first

interest rate reset, whichever is less. No prepayment penalty shall exceed three

percent (3%) for the first year, two percent (2%) for the second year, and one

percent (1%) for the third year of the outstanding balance of the loan; but in no

event shall a prepayment penalty be assessed against a borrower refinancing with

the mortgage loan company that funded the mortgage.